OPEC members are scheduled to meet next week, and some analysts believe a previous agreement to cut crude output could be extended beyond next March. Adding to the uncertainty about oil supply, the political situation in Iraq is volatile, and oil production fell last month when fighting broke out between Iraqi and Kurdish forces.

This background for base oils conflicts somewhat with the normal December scene, where refiners try to reduce inventories before the year ends. That practice has lessened in recent years, but there will still be sellers looking to unload volumes, so buyers are poised to take advantage of any markdowns. Its possible they will only be available for Group I grades.

Europe

Prices for exports from Europe show API Group I light solvent neutral grades are unchanged from last week, having increased previously to $695/t-$730/t. Prices for SN500 and SN600 did rise by around $5/t-$10/t to $775/t-$795/t. Bright stock offers are showing higher prices, but final numbers indicate that sellers are willing to trade out this grade, leaving values at $845/t-$870/t.

The prices above refer to large cargo-sized parcels of Group I base oils supplied or offered FOB ex-mainland European supply points.

Prices for Group I sales within Europe remain stable to firm ahead of Dec. 1, when contract adjustments may be made. Buyers do not appear to be concerned, stating that the effects of a small increase will be outweighed by sellers trying to move stocks prior to year-end. Buyers maintain that prices should be left unchanged for December, and in some cases they are looking for lower numbers, making the case that levels have already been amended to take account of raw material cost increases when crude rose from around $55/bbl to current levels.

The differential assessed for domestic FCA prices over spot exports narrowed slightly due to the increase in export values. It is now assessed at 50/t-70/t.

European Group II prices are stable to firm, with a few instances of buyers being asked to pay slightly above levels established during October. As discussed last week, market share appears to be all important to a number of players in the Group II markets, and to ensure that current customer relationships are maintained, suppliers will show a great deal of flexibility when it comes to pricing. At the same time, they are determined not to undercut their market by selling products too cheaply. Most of the main players hang their hats on finished product approvals that allow these base oils to be sold at a small premium.

Prices are adjusted upwards slightly this week, to $680/t-$695/t for light-viscosity grades and $775/t-$815/t for 500N and 600N. These nominal prices are for large bulk cargoes being landed CIF into Antwerp-Rotterdam-Amsterdam. The resultant distributor FCA or locally delivered prices are now assessed at around 770/t-800/t for light grades and 850/t-885/t for heavies.

Group III prices within Europe again show stability, but behind the scenes some sellers are pushing stage one delivered prices higher, trying to raise levels back to those last seen in European markets between 2012 and 2014, when Group III production was probably in balance with demand. Prices were around $150/t higher then.Stage onerefers to large bulk cargoes delivered to appointed distributors in various regions.

Prices for Group III grades landed into Northwestern Europe are now $785/t-$825/t on a CIF basis for 4 centiStoke and 6 cSt grades, with local euro stage two sales priced at 695/t-720/t, FCA Northwestern Europe. Grades with full slates of approvals basis FCA Antwerp-Rotterdam-Amsterdam are now reported at 790/t-825/t for 4 cSt and 6 cSt, with 8 cSt at 765/t-785/t.

These prices refer to ex-rack sales or truck delivered quantities of Group III base stocks, not to be confused with large bulk cargoes delivered to majors and distributors, where prices will be lower by $65/t-$90/t.

Baltic and Black Seas

Trade from Baltic supply points remains weak, but there are a number of December inquiries for cargoes of various sizes and grades to load both for deep-sea export locations, for example West Africa, and also for more local trades into the United Kingdom, Scandinavia and Northwestern Europe. Buyers are looking to catch year-end bargains, but so far sellers and distributors are maintaining price levels and in some cases imposing markups. Sellers argue that refinery ex-gate prices have risen as a result of crude and feedstock movements, and that now prices on an FOB Baltic basis will have to reflect those numbers.

FOB levels have been adjusted this week to $700/t-$740/t for SN150, $745/t-$760/t for SN500, $795/t-$820/t for SN900 and $885/t-$940/t for bright stock.

Black Sea sources have identified yet another large cargo to be loaded during December on an STS basis in Kavkaz, Russia. While the direction of this parcel is not disclosed, it is understood that another bridging operation will take place into Rotterdam. Whether this cargo will be loaded from a new T/C vessel or from the incumbent ship has not been announced. Russian SN500 is also reported moving out of Azov, being delivered into Gebze, Turkey, at around $798/t, delivered CIF.

Greek-sourced cargoes moving into Turkish ports are assessed higher this week, at $765/t-$775/t for light solvent neutrals and $810/t-$825/t for SN500, CIF. Group III base oils are between $810/t-$830/t delivered CIF Gebze, also moving higher as a result of rising FOB levels. These prices are for 4 and 6 cSt grades.

Middle East

Red Sea reports contain news that a number of cargoes are being prepared for shipment from Yanbu and Jeddah, Saudi Arabia during December. It is not known whether any of these shipments will contain parcels of the new Group II production which is imminently due out of Yanbu.

In Middle East Gulf regions, the news this week is that large parcels of Group I from Iran are moving out of Bandar-e Emam Khomeyni and Bandar Bushehr to the west coast of India and Pakistan. One cargo has been offered to Far East receivers, but whether this is fixed firm is not revealed from sources. Iranian premium SN500 has been reported higher again, with FOB levels from Sepahan Oil at $785/t, FOB Bandar Abbas.

The usual raft of Group III movements are reported from all three production locations in Middle East Gulf: Sitra, Bahrain; Al Ruwais, United Arab Emirates; and Ras Laffan, Qatar. Shipments from the latter location indicate that production from the Pearl refinery has restarted successfully and that material from that plant is being distributed to affiliates around the world.

All Group III producers have started to try to increase selling prices in the various markets in the United States, Europe, India, the Far East and the U.A.E.

FOB levels will be established at $710/t-$740/t for 4 and 6 cSt loading out of Al Ruwais. Sitra exports marketed by Neste will be priced higher since they carry approvals, and the GTL material from Ras Laffan will possibly command the highest prices of all, although these are not discussed by the owners. FOB levels from Sitra and Al Ruwais refer to material delivered on a CIF basis in large cargoes to major buyers or distributors in various locations worldwide.

Group II trades in the Middle East Gulf have gone quiet this week, perhaps due to the impending supplies about to commence from Yanbu. There are still offers on the table from Far East heard at $685/t-$695/t for light-vis grades and $855/t-$875/t for 500N and 600N, CIF Middle East Gulf.

Prices for local availabilities of Group II ex-U.A.E. on an FCA or delivered basis are assessed at $820/t-$895/t for 100N/150N/ 220N, with 500N/600N at $875/t-$945/t delivered. Prices are variable and depend on distances engaged, quantities and mode of shipment.

Africa

Many receivers and traders are looking to make purchases from various sources for onward sales into West Africa, particularly Nigeria. Sources in Lagos say many of these buyers are expecting to pick up lower cost base oils during December from the Baltic, the U.S. Gulf Coast, the U.S. East Coast and mainland Europe. European and Baltic prices have already started to rise, and it would not take more than two large cargoes for Nigeria to shorten the Group I market. U.S. Group I supplies appear to be snug for these types and sizes of cargoes, perhaps limiting any discounting for West Africa receivers.

There may be some disappointed buyers and receivers waiting for year-end bargains that may not materialize this time.

Price hikes, while not substantial, nonetheless suggest the direction the market is taking, and that certainly is not downwards. Increases have already been seen from European and Baltic suppliers, with SN150 delivered into Nigeria on a CIF/CFR basis for $920/t-$940/t, $955/t-$975/t for SN500, $1,015/t-$1,045/t for SN900 and $1,080/t for bright stock.

The prices above refer to quantities of Group I delivered CIF/CFR Apapa, Lagos, in minimum parcel sizes of 5,000 tons total.

Ray Masson is director of Pumacrown Ltd., a trader and broker of petroleum products in London, U.K. Contact him directly atpumacrown@email.com.